Bitcoin Breakout Causes Short Liquidations: What Price Targets Can We Expect?

Intro

The stock market, as well as the crypto market, has seen some upside. The BTC breakout caused massive liquidations across the board. In this analysis, I will share my expectations on what I think can happen, what targets BTC and ETH might reach, and what resistance you can take profit from. Enjoy!

Onchain Edge

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Global market

On the daily timeframe, the S&P500 managed to break above the blue descending trendline that began in August and is trading at $ 3'880. There is a chance that the index will rally toward the next trendline at $4113. However, it will be difficult for the S&P500 to break above that multi-month resistance. The upward rally is invalidated if the index makes a new low below $3500.

The Nasdaq100 still needs to have its moment to shine. It's currently trading at $11k and is trying to break above relatively strong resistance at $11.7k. Unfortunately, it just got rejected, so the next candles will tell us if we might see a breakout above the blue downwards slopping trendline at $12k.

The DXY dropped below $111, which is good for stocks and crypto. The drop below the support and a break below the blue dotted trendline signal that investors are selling dollars to buy risk-on assets like stocks. The current bear trend is losing steam, and we might be able to see a short-term relief rally. However, remember that the macro picture is still somewhat bearish, and you should take profits aggressively

Technical Analysis

Monthly Timeframe (long-term) = Bearish

Weekly timeframe (mid-term) =   Bearish

Daily Timeframe (short-term)  = Neutral

Global market cap with BTC

The crypto total market cap with Bitcoin is currently at $846B and has stayed pretty much the same over the last two months. However, in the last two days, we had the first significant price in a long time. What I find interesting about the current candle is that the global market cap broke above the bearish November trendline, which acted as a significant resistance at the end of March 2022.

The next resistance the global market needs to tackle is the $900B level. A short-term relief rally could even bring the market to $1.2T. However, before that, we need that confirmation break above $900B

Global market cap without BTC (USDC + USDT caps removed)

The altcoin market is currently trading at $448B and is just starting to tackle the bearish descending trendline. In the next few days, we will see whether the altcoin market manages to break above or will get rejected. The good thing is that altcoins are generally lagging behind BTC

USDT+USDC dominance

The stablecoin dominance broke below the blue trendline, which was acting as a support and is now at 11.71%. The more this falls, the more investors are piling back into the markets. Since most investors are bearish, they will experience a lot of FOMO with the rising prices. Should the market rally, this will be known as “the most hated rally,” and many short positions will get liquidated

BTC dominance

The BTC dominance increased over the last few weeks and now just got rejected by a long-standing bearish trendline. It's currently at 41.51%. This is relatively strong support from which the BTC dominance bounced off in May this year.

BTC technical analysis

BTC is trading above $20k again, at exactly $ 20'770 at the time of writing. Even though this is a relatively small move, it is rather large compared to the low volatility of the past weeks. What I like about this breakout is that $BTC broke above the blue trendline, which has been acting as resistance since November last year. Furthermore, there I a slight chance that $BTC enters the cloud, which opens up the potential for an edge-to-edge move. A move that would allow $BTC to retest the $21.7k level.

However, I'm still determining if the bear market bottom is yet. Now that shorts have been liquidated (see chart below), it is possible that this entire move was just a bull trap, and longs will get liquidated on the move down to $15k. This is a bearish take, but it's essential to remember. I'm confident that the bear market bottom will be around $15k. I go into more detail about why that is likely in this tweet.

Ethereum TA

ETH has outperformed BTC over the last few days with a much more decisive breakout. Again, ETH is leading the way and is now trading at 1'555. The move will continue similarly to the move we saw in August, which resulted in the price of ETH topping at around $2k.

ETH outperforming BTC can be seen in the chart below when looking at the ETH/BTC ratio. Now ETH is trying to break above the cloud at 0.07. This will be a challenge. Thanks to the transition to POS, the issuance of ETH has dropped, leading to lower selling pressure. It will take some time for the market to price that in. Furthermore, as soon as the transactions and the market euphoria on the Ethereum blockchain will increase, the deflationary aspect of ETH.

On-Chain Analysis

BTC on-chain analysis

The BTC exchange reserves have decreased over the last few days leading to lower selling pressure. The Net Unrealized Profit is still in the Capitulation phase. Therefore, the market sentiment is good. However, there is still relatively low fund/ETF buying pressure. Most of the buying pressure is coming from US investors. Korean investors reduced their buying pressure.

The BTC price is testing the lower Bollinger band, which has acted as a magnet in the past. So let's see if it manages to break past; that would be a relatively bullish signal.

The Puell Multiple isn't in the “strong buying area” anymore since it moved to 0.62. You've had a long time to DCA into BTC and ETH over the last few weeks while the Puell Multiple was below 0.5. The next resistance will be at 0.8. I might consider taking some profit then.

The NUPL is still below 0, which means we are still in “buying territory”; however, it's not as great as when the NUPL was at -0.18, which was very close to the 2020 bottom. The higher the NUPL goes, the more I recommend you take some profit, as other swing traders will likely do the same

Last we have the MVRV. This is still within the “Strong buying” area, below 1

Two out of three onchain indicators indicate that it's still an excellent time to buy. Ideally, you would have accumulated what you wanted in the last few weeks when the price was boring. So do not FOMO back in right now because you feel like you missed the boat.

As a slight warning, the RSI broke above an important trendline which has been a critical sell signal in the past. I will be paying attention to this as well as the next indicator

I will keep my eye on the NVT golden cross, as it has been a good indicator of when the market trend will shift. Currently, it's not close to the 2.20 sell level, which is good.

Conclusion

If you have accumulated some crypto over the last few weeks, I recommend you should keep an eye out for basic resistance levels and take some profit on green days. That will allow you to buy more when the market drops. The stock market might have a bit of fuel for a short-term relief rally. The DXY is a good sign of some risk returning to the market. All in all, it's nice to have some green in the markets, but don't get carried away, and remember to take some profit off the table.

Cheers,

Onchain Edge